Speaking to students at Wayne County Community College in Michigan last week, Barack Obama unveiled a new strategy that he claimed would help working families cope with the skyrocketing costs of higher education. His ambitious proposal, which promises a $4,000 tuition tax credit in exchange for 100 hours of community service, seeks to mitigate the burden of mounting student debts and help a rising generation of middle- and low-income students pay for college.

“You get a hand living your dreams, and then you help your fellow citizens live theirs—that’s how we’re going to move this country forward,” Obama said. “We cannot let the doors of opportunity close because we couldn’t come together to lower the cost of college.”

Obama shouldn’t have a tough time selling his new plan. The notion that millions of qualified high school graduates don’t have the money to attend college has become the crisis du jour in American higher education. A LexisNexis search of major U.S. newspapers over the past two years shows that the term “college affordability” has appeared in 751 articles, with typical headlines reading “Funding the ever-more-costly college education” (The Boston Globe), “College costs: a tough equation” (The Washington Post), and “Rising costs make climb to education steeper” (USA Today).

There’s no question that the cost of college has grown markedly over the past decade and that many students are struggling to foot the bills. According to the College Board, tuition and fees at private four-year universities have increased by $5,889 since 1998, while the cost of public four-year institutions has jumped by $2,100. In percentage terms, college costs have increased at more than twice the rate of inflation.

While these trends are troubling, the federal government has hardly been unresponsive to rising college costs. In real dollars, federal grant aid has increased by $8 billion over the past decade, while loans provided by colleges have risen by $11 billion. In addition, state grant aid for students is up 78 percent over the last ten years. A recent move by Congress to slash the interest rate on the subsidized Stafford loan from 6.8 percent to 3.4 percent will cost an estimated $18 billion over the next five years.

‘Paradoxically, many economists now argue that student-aid hikes actually contribute to tuition increases,’ says Brian Reidl of the Institute for Economic Policy Studies.

Given the uneven results of these efforts in controlling costs and promoting consumer choices, it’s reasonable to ask whether a conventionally subsidized federal disbursement program like the one Obama advises makes sense. Supported by reassuring rhetoric about the government providing hardworking young people with a “hand up and not a hand out,” the Obama campaign acknowledges that the tax credit would cost taxpayers $10 billion a year.

Obama’s plan might offer short-term relief for parents and students. But would it dramatically boost the number of middle- and low-income high school graduates attending college? There are plenty of reasons to be skeptical.

For one thing, it’s unclear whether cost is really the main obstacle preventing those students from going to college. Research by Jay Greene and Greg Forster of the Manhattan Institute suggests that the prohibitive effect of high tuition and fees may be overstated. Using data from the U.S. Department of Education’s National Assessment of Educational Progress Transcript Study, Greene and Forster estimate that only about 270,000 of the roughly 4 million “college-entrance-aged” persons who don’t attend college are hindered explicitly by cost. The rest dropped out of high school, failed to take the academic coursework necessary to attend a four-year college, or didn’t possess even basic reading skills.

Meanwhile, a 2004 report by the Congressional Budget Office found that “the share of education costs borne by [low-income] students is as low as or lower than the share borne by students from higher-income families.” In fact, the study explained, students from low-income families actually work and borrow less throughout college than middle-income students, while the majority of students from low-income families are able to finance their college costs without exhausting the government loans for which they’re eligible.

But perhaps the biggest reason to doubt Obama’s tax credit is this: it might actually make college more expensive. “Paradoxically, many economists now argue that student-aid hikes actually contribute to tuition increases,” says Brian Reidl of the Institute for Economic Policy Studies. “Colleges, like businesses, charge as much as their customers are able to pay.” In other words, colleges often raise tuition in response to increases in student aid so that they can capture an additional share of the revenue.

Middle- and low-income high school graduates already have plenty of financial aid options; unfortunately, there seems to be a significant information gap. A recent report by the U.S. Department of Education found that 65 percent of high school students and 58 percent of their parents knew little about financial aid and overestimated the costs of attending college by more than 25 percent. In fact, a majority of full-time dependent students can attend a public two-year college for no more than 2 percent of their family income, and most students at public four-year universities pay less than $6,000 a year in tuition and fees.

Obama’s tuition tax credit is well-intentioned and oriented toward the worthy goal of helping more Americans pursue higher education. But before investing billions of dollars in yet another government outlay, we should first consider taking steps to simplify the current financial aid process and ensure that every student is aware of his or her options for financing college. Sensible measures like that would produce real benefits for students aspiring toward a brighter future.

Thomas Gift is a research assistant in education policy studies at the American Enterprise Institute. Julia Payson is an intern at AEI and a rising junior at the University of Southern California.

Photograph by Getty Images.